Share with your friends










Submit
London city street

6 things to consider before renting a room to a lodger

City street in flat design style, United Kingdom

If the thought of renting out a spare room conjures worrying images of Rigby in Rising Damp then think again.  Not only could a room in your property bring in extra income, it could do so tax free.

With the Government actively encouraging the renting of available space in private homes through the Rent-a-room scheme, bringing a stranger into your home need not be a daunting concept, so long as you do your homework and consider matters carefully in advance. The number of people now renting out a spare room has risen significantly in the past 12 months, no doubt due to the current financial pinch.

So, if you have space that is simply gathering dust, here is a quick guide on how you could turn that dust into cash.

Rent

The amount you can charge for your spare room very much depends on where you  live in the country. Other matters such as the size of your property, the condition of your home and the provision of extra amenities such as an en suite will dictate what level of rent you can charge.

Give consideration to whether the rent will include bills such as electricity, gas, water charges and council tax or are they to be charged separately. If so, how are they to be calculated?

Be aware that you will lose your right to deductions in single occupancy council tax if you bring someone else into your home. You must balance the costs and benefits accordingly.

The Government’s Rent a Room Scheme

The Rent a Room Scheme allows you to earn up to £4,250 per year tax free from letting out a room. The room must be furnished and you cannot offset any expenses against the tax. Tax exemption is automatic if you earn less than the £4,250 threshold. If you earn more then you must complete a tax return.

Finding your lodger

Just as you can advertise on line for a romantic interest to share you life, so you can advertise on line for someone to share your home. There are numerous websites offering introductions to landlords and lodgers. Be aware that whilst some of these sites might not charge you to advertise, there could be a charge for contacting your prospective lodger.

Lodgers can also be found in more traditional ways such as a postcard in a local shop or an advert in a local newspaper. Universities and Collages are also a good place to advertise for lodgers.

Your advertisement should make clear what type of accommodation is being offered, level of rent and any conditions set on use of the room or the house as a whole.

Lodger Application Form

In order to ensure you find someone who is going to be a suitable house mate, a simple application form is a good place to start. This need not be a complicated affair and should simply seek information on the prospective lodger’s previous address, current address and current employer.

Proof of identity is a must so a passport or driving licence is required. You would also wish to obtain at least 2 references from employers or previous landlords.

In addition, ensure your application form entitles you to obtain signed authorisation from your prospective lodger that you can check their credit level. Various websites offer credit checks on potential lodgers for a small fee. This gives you peace of mind that you can expect payment each month from someone who has the wherewithal to provide it.

The Lodger Agreement

It is important that both parties are clear on where they stand from the outset. Therefore, it is important to have a contract in place which covers every eventuality.

The rent a room scheme is different to that of a remote landlord and tenant in that the tenant does not have a right to remain in your home. However, the law stipulates that you provide them with a “reasonable notice period”. You will want to agree what that period is, but it is usually interpreted, if not stipulated, as 30 days.

Other issues for consideration include whether you allow your tenant to bring pets, whether their partner/friends are allowed to stay over and if so, how often. Other delicate matters such as how food is shared (or not) must be agreed and a cleaning rota should be drawn up as well as a rota for the bathroom, if you both require to share. Do you wish a deposit up front for damages or potential losses? You also require to consider issues of privacy. Are there areas in your home you do not permit your lodger to go? Are you permitted into their room?

Setting things out clearly at the outset will avoid any unnecessary and potentially awkward situations later on.

Insurance

You will have to advise your current contents insurer of the addition to your household.  Your lodger will not require their own building’s insurance but they will be required to obtain individual contents insurance for their own room.

Rocket Lawyer UK offer a quick guide to many aspects of renting a room to a lodger and our suite of business documents cover the paperwork you’ll need.
Start a free 3 day trial here.

Camilla Johnson

Camilla Johnson

Camilla Johnson is the digital acquisition specialist for Rocket Lawyer UK. She has a law degree from Keele University, a post graduate diploma in professional legal practice and a diploma in digital marketing.
Camilla Johnson

RELATED POSTS